Financial Glossary

General Definitions

Any item of economic value owned by a person or entity. Examples are cash, securities, accounts receivable, inventory, office equipment, a house, a car and other property. On a balance sheet, assets are equal to the sum of liabilities and an owner's equity.

An individual, institution, trustee or estate that receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust or other contract, upon the death of a certain person.

Debt securities or investments essentially loans funds to a government or business for a certain period of time. Generally, the principal along with interest is paid back to the investor on a specified date(s). It's often secured and has priority over shareholders if the company becomes insolvent and assets are distributed.

The Canada Deposit Insurance Corporation (CDIC) is a federal corporation designed to protect deposits made to member financial institutions. You don't have to pay for this insurance — it automatically covers all deposits made to member institutions up to $100,000 in the even the bank or trust company fails. It does not protect against scam or theft.

Through the Canada Education Savings Grant (CESG), eligible contributions to a Registered Education Savings Plan can qualify for a grant from the government. The CESG is available to Canadian children under the age of 18 based on some rules and restrictions.

The Canada Learning Bond (CLB) is designed to help families start saving for post&mdashsecondary education earlier. There are eligibility rules and restrictions which can be found on the Service Canada website.

Provides an income to people who have worked and payed into the plan. The amount of benefits depend on how much and for how long a person has contributed, and sometimes can be affected by when a person starts drawing on benefits.

An employer sponsored retirement plan that promises to pay a set income when an employee retires. The income amount is based on formula determined by the employer. The formula often accounts for the number of years worked and salary.

A plan where a company pays a set percentage or amount into a personal account for an employees retirement. There are restrictions and penalties for the employees if they wish to withdraw this money prior to retirement.

A method of portfolio asset allocation that spreads investments over a broad range of securities and/or asset classes. The goal of diversification is to reduce risk exposure to a specific security, sector or asset class by balancing the portfolio's risk and return potential.

When you invest a fixed amount regularly, over a longer period of time, you may purchase more shares when prices are low and fewer shares when prices are high. This lessens the effects of a volatile market.

An increase in the value of shares that results in a higher worth than the purchase price. A gain is not realized until shares are sold. Also known as Capital Gains, this should not be confused with the capital gains that are reinvesting into a shareholder's account or paid in cash to a shareholder at the Fund level.

The Home Buyers Plan allows you to withdraw up to $25,000 in a calendar year from your RRSP, without any tax penalties to build or purchase a qualifying home for yourself or a related person with a disability.

The increase in the price of goods and services in an economy is usually measured by the Consumer Price Index and the Producer Price Index. Over time as the cost of goods and services increase, the value of a dollar falls because a person won't be able to purchase as much with that dollar as he or she previously could.

The Life Long Learning Plan (LLLP) allows you to withdraw funds from your RRSP to finance qualifying full—time training or education for yourself, your spouse, or your common law partner. There are applicable limitations and restrictions

When you leave a company or retire, you open a Locked In Retirement Income Fund (LRIF) with the money from your vested pension plan. It provides you with a regular income, but there are withdraw restrictions.

This type of account works much like a regular Registered Retirement Savings Plan (RRSP), but you cannot withdraw the money until retirement. You will use a Locked In RRSP if you are changing jobs and are vested in your company's pension plan.

In general, a capital gain (or loss) is realized when the shareowner sells or exchanges shares from his or her account for more (or less) than the purchase price. Unrealized gains (or losses) are reflected in the net asset value of the unredeemed shares in the account.

A Registered Education Savings Plan (RESP) is an account that is registered with the Canadian government that allows you to save for a child's or grandchild's post-secondary education. Contributions grow tax deferred and may qualify for a match from the government up to certain lifetime and annual limits.

A Registered Retirement Savings Plan (RRSP) is an account that you use to save for retirement. This account is registered with the federal government and has provisions for maximum contributions per year. In order to encourage savings, the Canadian government has mandated that contributions are tax deductible - meaning they reduce your taxable income.

A portion of ownership in a company. This does not represent any control in a company, however, if a company declares a profit and dividends to be paid, shareholders may receive a portion of that profit.

A type of RRSP where generally a higher income individual will contribute to an RRSP in their spouse's name. The individual contributing receives the tax deduction, but the spouse receives the contributed funds in retirement.

A security that denotes ownership called equity in a corporation and represents a claim in its dividends and net assets. In a corporation with a single class of stock, ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example if a company has 1000 shares of stock outstanding and a person owns 50 of them, then he or she owns 5 percent of the company.

To encourage Canadian citizens to save more for long term needs such as retirement, the federal government introduced the Tax Free Savings Account (TFSA) in 2009. TFSA contributions are not tax deductible, but any interest and growth is sheltered from tax - even upon withdraw. Money can be withdrawn from the account at any time for any purpose completely tax free. There are annual contribution limits which can be found on Revenue Canada's website.

A tax-free movement of funds from a registered account such as a Registered Retirement Savings Plan to another registered account. The shareowner does not receive the money since the cheque is made payable to the bank for the benefit of the shareowner. In most cases the cheque is mailed directly to the receiving custodian.

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